UK listening growth demonstrates radio’s strengths in a multi-tasking world

The latest RAJAR ratings data for Q2 2011 demonstrate the continuing strength of the radio medium in recession Britain. Maybe if your TV or mobile subscriptions are having to be pruned, you turn to radio instead. In times of austerity, one of radio’s greatest attributes is that it appears to consumers to be available ‘free’ at the point-of-use.

‘All radio’ listening (1,076m hours per week) is at its highest since 2003. Adult weekly reach is 91.7%. Each listener spends an average 22.6 hours per week with ‘radio.’ These are impressive numbers. In this respect, it is important to remind ourselves that the RAJAR definition of ‘radio’ excludes:
• ‘listen again’ consumption of broadcast radio (online catch-ups of ‘The Archers’, for example)
• all podcasts
• listening to pure online radio stations
• listening to online music streaming services or personalised online radio (Last.fm, Spotify, etc).

If these additional ‘radio’ consumption sources could somehow be added to the RAJAR data, it looks likely that, using a wider definition, ‘radio’ would be performing at an all-time high. This is not at all surprising in our time-precious, multi-tasking world. Radio proves the perfect aural accompaniment to online social activities, whereas it is nigh impossible to watch television or read a newspaper at the same time as you browse the internet. Radio is a secondary medium – it never monopolises your time.

Commercial radio has benefited from this uplift in total radio listening. Total hours listened to commercial radio (470m per week) have risen from what is beginning to look like a nadir in early 2010.

During the last two quarters, commercial radio’s adult weekly reach has jumped above the 65% threshold (65.5% in Q2 2011) that had not been breached since 2003.

In absolute terms, commercial radio’s adult weekly reach has almost caught up with the UK population growth experienced since 1999, rising to 34m in Q2 2011, marginally below its all-time high the previous quarter.

The remaining stumbling block for commercial radio is that its average hours consumed per listener remain stubbornly low (13.8 in Q2 2011). As noted previously, young people are spending less time with radio [see my blog]. Commercial radio’s audience is considerably more youth-orientated than BBC radio, which is why the average length of time for all adults listening to commercial radio remains in the doldrums.

With all this good news for the commercial radio sector, you might imagine that its share of total radio listening had started gaining in leaps and bounds at the expense of the BBC. Unfortunately, this is not the case. The BBC has benefited just as much as commercial radio has from the overall increases in radio listening. As a result, everyone’s volumes are ‘up’ and the share of commercial radio versus BBC radio has remained relatively constant. In Q2 2011, commercial radio’s 43.7% share was certainly an improvement on the situation in 2008, when it had looked as if the 40% barrier might be plumbed for the first time.

In fact, the BBC’s sustained strength in radio is becoming increasingly understated as more and more ‘radio’ listening is attributable to ‘listen again’ on-demand usage and podcasts. The BBC dominates the content available on both these platforms, whilst commercial radio’s offerings remain relatively sparse. At present, neither platform is measured within RAJAR. If they were, commercial radio’s share would undoubtedly be diminished further.

At present, this status quo (using RAJAR’s anachronistic definition of ‘radio’ as purely live and broadcast) suits both parties. The BBC does not wish to be seen to be even more dominant than it already is (54.0% of radio listening in Q2 2011). Commercial radio does not wish to be seen to be weaker than it already is (43.7%) in comparison to the BBC.

And who pays for RAJAR? The BBC and commercial radio. So we are stuck with an old fashioned metric that does not measure radio consumption in the 21st century sense of what we now call ‘radio,’ but which keeps both its paymasters happy … particularly as neither the BBC nor commercial radio would currently wish to demonstrate publicly the increasing popularity of online ‘radio’ consumption – which remains the biggest long-term external threat to them both.

GERMANY: DAB “is not financially viable”, internet radio on the rise

“DAB or DAB+, in its current form, is not financially viable for commercial radio stations,” said Stefan Schmitt, managing director of RTL’s Berlin radio stations, in Promedia magazine. He pointed out that user numbers were increasing steadily for the internet, wireless via PC, laptops and smartphones. “Under these circumstances, I do not know where exactly the added value is for DAB,” he said.

Schmitt argued that the whole radio business model is still based on FM broadcasting and will remain so “for the foreseeable future.” He believes that the best alternative to broadcasting is currently ‘online radio’: “We are achieving market penetration [with online] much more rapidly than with DAB, which is not market driven.”

In Germany, a dispute continues to rage over the funding of DAB radio. The CDU party’s media expert Thomas Jarzombek has argued that “more than €200m of public funds were wasted on DAB” and that “these resources should be used for technologies that are well received by the public.”

Negotiations have been proceeding for months over a further €42m of public funds earmarked to be released to re-launch DAB radio nationally using the DAB+ codec, following the failure of the earlier launch using the older DAB codec. Initially, the contracts between transmission provider Media Broadcast and the station owners were meant to have been signed on 22 July 2010. Then, the subsequent 22 September 2010 deadline for negotiations passed without agreement, as a result of commercial radio’s unwillingness to commit financially to broadcasting on DAB+. This deadline has been extended again to 15 December, which experts in Germany
now suspect is “the last chance for DAB+.”

At its annual conference on 12 November 2010, the German association of commercial broadcasters, VPRT, reiterated its opposition to the government forcing the introduction of DAB+ radio upon the German market. Outgoing VPRT vice president Hans-Dieter Hillmoth
said: “The current draft of the new Federal Telecommunications Act ignores the existing interests of commercial radio in the functioning infrastructure, whose core business is FM radio.”

New
research in Germany by the Frankfurt Link Market & Social Research Institute has demonstrated the increasing popularity of listening to radio via the internet platform. Consumers’ preference for radio delivered to a PC or laptop increased 84% year-on-year, and is now exceeded only by traditional radio hardware – car radios, kitchen radios and stereo systems. Amongst 14-29 year olds, radio via a PC/laptop scored second only to the car radio.

The question put to respondents was: “Radio can now be received on many different types of appliances. Please indicate which appliances you particularly appreciate, regardless of duration of usage.”

BBC head of radio: DAB not “a clear enough offer to listeners”

The Tony Livesey Show, BBC Radio 5 Live, 28 October 2010 [excerpt]
Stephen Nolan, interviewer (presenter, BBC Radio Ulster) [SN]
Tim Davie, Director, BBC Audio & Music [TD]


SN: There are big problems with the digital spectrum, aren’t there, because we cannot seem to hit any target that we are given for people switching to digital?

TD: I don’t think we’ve had many targets … Let’s be honest, I don’t think we’ve had many targets in the past. Digital stations are doing well. Digital listening – we’ve got to be careful – includes online, which is doing pretty well, there’s more we can do. Then also you’ve got DAB. Now DAB, you’re right, it’s been marginally growing for a while …

SN: Why?

TD: I just don’t think it’s been a clear enough offer, in my language, to listeners. I mean, people love radio. They are very happy with their FM radio. Why on earth would you change? And I think the radio industry has to say: ‘the reason you will change is – here’s a load of content’. And there’s clues like 6 Music, or other …. you know, that people love. And here’s a load of stuff that people love, and here’s a better … this device does something better than the other one.

SN: Or, Tim, it’s for the BBC to take a huge risk, and a controversial risk at that, and to withdraw mainstream programming from the FM spectrum and put it onto DAB. Imagine how the numbers would soar if it had [BBC Radio 1 breakfast DJ Chris] Moyles or …

TD: [interrupts] Imagine my inbox!

SN: Exactly, exactly. It’s a serious point.

TD: Sure.

SN: Imagine if you had Moyles or [BBC Radio 2 breakfast DJ Chris] Evans exclusively on DAB, or a massive programme.

TD: Right! And … we could do that. The issue would be that, with current coverage levels and with the amount of devices – particularly in Northern Ireland – I would basically be saying that you can’t listen to it in your kitchen, and everyone pays the Licence Fee. So I think the strategy for digital, where we are taking things away, is not going to work. My approach would very much be that I do want you to feel a bit of pain for not having a digital radio, but that pain is not about not getting The Archers, or not getting Chris Moyles. It’s about: ‘you could get a bit more over here’, or ‘there’s a bit of [Radio] 4 Extra over here that you could really do with’, and that’s what television did with some of those channels.

SN: Do you think, in terms of the internet, that radio is going to fundamentally change?

TD: I think there will be a lot more on-demand, obviously, so people will expect to be able to call up a programme and …

SN: I’m talking about the [UK] Radioplayer, obviously, which people are describing as the new YouView for radio.

TD: Well, er, yeah. Basically, the Radioplayer is … we’ve got the whole industry together. Only about 3% of listening is online and I can’t understand that, as head of radio. I know I’m biased but, at the end of the day, when I’m shopping and doing my Tesco shop or wherever online, why aren’t I listening to the radio? [to SN] Well, you would relate to this because it means more listeners. I think that one of the things is that I think it’s a bit confusing. You’ve got the BBC on the iPlayer, which is pretty good, and we’ve got other bits and … So we’ve put it all together and there will be a thing called the Radioplayer. Now, it gets a bit complex, but I think the YouView thing that you refer to is when you’ve got an internet connection to your television. Now, when you click your television on, I want one Radioplayer icon where you can go in and listen to all the radio. Now, the …

SN: On the TV?

TD: Yeah. On any screen – sorry to sound ‘new age’ – any screen anywhere, whether it’s a … whatever the size of it, you can go and get all your radio services. We don’t currently have that.

Shameless Book Plug

Apologies for the interruption to my normal radio sector analyses, but I wanted to let you know that a book of my writings about DAB radio was published this week. It collects together 99 of the essays that have appeared in this blog over the last two years concerning the digital radio switchover issue in the UK. The period between 2008 and 2010 was a critical ‘make or break’ time for DAB which ended with the legislation of the Digital Economy Act. But have any of the committees, consultations, working groups, reports and recommendations from this period made any difference to the slowing take-up of DAB in the UK? No.

Leslie Burrage, chief executive of Roberts Radio, one of the main UK manufacturers of radio receivers, said recently:

“I’ve been surprised by how many of my peers at the golf club have adopted internet radio and some of those are people who can’t even get a decent FM signal, never mind DAB. The key issue with DAB and the migration to FM is going to be dictated by the speed at which at the motor car can be migrated, and there is no easy solution. If the migrations takes 20 or 25 years to go as it did from FM, the future is just possibly wi-fi.”

Digital radio switchover seems doomed and the only people still talking it up are those who have a direct stake in it, either through their financial investments, or from earning their living from talking it up. Because the UK started on the DAB switchover trail earlier than other European countries, our experiences have relevance to markets that started later on the DAB journey.

This week, it has been interesting to see the interest my book has spurred in markets such as Norway, Denmark and Italy where, like the UK, DAB is still being pursued despite widespread consumer indifference. In Norway, a news story about the local receiver market appeared in the newspaper Aftenposten headlined ‘Customers do not want DAB: FM is still selling like hotcakes’. The buyer at a Norwegian electronics store said that DAB was already a flop and he was quoted: “So far, this year, according to industry sales statistics to which I have access, only one DAB radio has been sold for in-car installation”.

Many countries are awaiting some kind of government decision as to whether digital radio switchover will still be a policy goal. In Norway, a government report on the DAB issue is to be published later this year. In France, a government report on the financial model for digital radio was meant to have been unveiled this week, but was not. In Germany, the 21 September deadline by which state and commercial radio was meant to have submitted a joint plan for government funding to re-launch a national DAB+ multiplex passed without agreement and has had to be extended to 15 December 2010. One German
report said “it is highly doubtful whether the negotiating parties will agree by the [new] deadline.” Another report said: “experts suspect that this is the last chance for DAB+.”

In Italy, radio stations that have started broadcasting in DAB and DRM are angry at the lack of digital radio receivers in their shops and have
turned to UK manufacturer Pure Digital for help. One Italian report asked: “Do people feel the need to replace their old FM radios? Especially in the era of the smartphone, internet radio and applications, the answer seems obvious.” In Spain, the existing DAB radio licences that were initially issued for a ten-year period in 2000 have just been extended to fifteen years, in the face of widespread consumer apathy towards DAB radio.

It is evident that the digital radio switchover issue continues to generate a lively debate in many European countries. My hope is that our experience in the UK can help other countries make an informed decision about the adoption of a realistic plan for ‘the future of radio’ in their own markets.

DAB DIGITAL RADIO: LICENSED TO FAIL
GRANT GODDARD
Radio Books, London
ISBN 978 0 9564963 0 0
paperback 297×210 mm, 314 pages
1 October 2010
book excerpts here
more information http://www.radiobooks.org
available from online book retailers including Amazon

Book plug over.

GERMANY: “The over-40’s will be listening to radio on FM for the next 40 years”

On the afternoon of 10 August 2010, a group of radio people from Germany, Austria and Luxembourg gathered in Erfurt, Germany to discuss the future of radio in the digital age. They had been invited there by the media regulator for Thüringer state (TLM) and some of the region’s broadcasters. The event was entitled ‘Radio 2020: a radio future between optimism and pessimism’ and followed on from a similar event held a year earlier.

This year, the final conference session tackled the topic ‘Radio and the day after tomorrow: new possibilities for distribution and exploitation of radio content on the internet’. A presentation by Dr. Klaus Goldhammer, managing director of the Goldmedia Group in Berlin, included the assertion:

“Radio broadcasting and internet radio are different markets.”

Goldhammer plotted the flow of daytime audiences in Germany for broadcast radio and internet radio on the same graph. It demonstrated that the peak broadcast radio audience between 0700 and 0800 corresponded with the lowest daytime audience for internet radio. Conversely, the peak audience for internet radio was between 1800 and 0000, corresponding with broadcast radio’s lowest audience of the day (see the slide below from his presentation).

Goldhammer noted that 31% of internet radio’s daily hours listened were consumed between 1800 and 2100. This appears to be very different from the US experience where a significant volume of listening to internet radio takes place during office hours in workplaces. In Europe, listening to radio (any radio) at work is still nowhere near as common as it is in North America.

Goldhammer noted that the growth of internet radio listening was still very slow in Germany, compared to the growth in available internet bandwidth. He concluded that:

“The over-40’s will be listening to radio on FM for the next 40 years”

Lars Gerdau, managing director of LandesWelle Thüringen, a regional rock/pop radio station broadcast on 14 FM frequencies, commented:

“We see the whole [internet radio] thing has become much more complicated than a year ago. Firstly, it is very expensive to stream a lot of radio programmes and, secondly, we have no claim to be first [in the internet space]. We have time and will focus first on FM.”

After the conference, Inge Müller-Seibel, a German radio sector commentator, noted that neither was DAB radio replacing FM as the main listening platform:

“After two decades of experimentation in Germany, the future of digital [terrestrial] radio remains uncertain. It was 1987 when the new DAB transmission technology was presented for the first time at the IFA in Berlin. Some ten years later, the German states listened to Brussels and recommended the closure of their terrestrial FM frequencies by 2015 at the latest. But almost nobody believes it will happen, and now the radio stations are putting more hope in new distribution technologies via the internet.”

And a reporter at this year’s IFA consumer electronics fair wrote:

“Digital radio is not a success story in Germany. Little more than 500,000 digital receivers have been purchased, a tiny number compared to the several million analogue FM receivers.”

A recent article in Die Welt newspaper asked ‘When will FM radio die?’ and explained:

“In fact, the [FM] technology should no longer exist. Originally, the abolition of FM was planned for this year. Instead, radio listeners across the country should have been receiving only digital signals. But the outcome has been different because most people are completely satisfied with the quality of good old FM stereo, and because of the inertia from an estimated 300 million FM radio receivers in Germany. Only a few geeks have so far bought digital radios with DAB technology.

Additionally, it is mobile phones, a symbol of the triumph of digital technology, that have supported the continuation of analogue FM radio. This is because most phones have a built-in FM radio receiver.”

[thanks to Katrin Penzel]

Digital radio switchover: a Broadcasting Minister’s last day: “there is nothing that I am trying not to say”

Apologies: this is an extremely long blog entry. I suggest it is worth persevering with because, more than any other ministerial statement, the transcript below illustrates perfectly the government’s mistaken determination to press ahead with its policy to adopt DAB radio. During the weeks it has been sitting, the House of Lords Communications Committee has become increasingly adept at understanding the flaws and contradictions in the Digital Economy Bill’s radio clauses, which is why their dialogue here with the Minister crackles with suspicion.

Siôn Simon handles his government script with the aplomb of a dodgy used car salesman, combined with the smug self-satisfaction of a schoolboy who can proffer a verbal comeback to any question asked of him. In December 2009, Simon had to repay £20,000 in parliamentary expenses for a second home he was renting from his sister between 2003 and 2007. Embarrassingly, the Broadcasting Minister reveals here his mistaken belief that the government’s proposed 2015 digital radio switchover date is written into the Digital Economy Bill. It isn’t.

I could itemise the many flaws in the Minister’s replies to the Committee’s questions, but it would spoil your reading fun. Your starter for ten – Halfords does not stock DAB radios.

House of Lords
Select Committee on Communications
“Digital Switchover of Television and Radio In The UK”
10 February 2010 [excerpt]

Witnesses:
Mr Siôn Simon, a Member of the House of Commons, Minister of State for Creative Industries
Mr Keith Smith, Deputy Director, Media in the UK, Department for Culture, Media and Sport

Chairman: Good morning. Thank you very much for coming, you are very welcome to the Committee. Now, Mr Simon, you are the Broadcasting Minister.

Mr Simon: For the moment, until the end of today.

Chairman: Well, that is what I was going to raise with you. How long have you been in this post?

Mr Simon: I have been in this post since, I think, the beginning of June last year and today is my last day, so this will be my final appearance before a Select Committee and I am looking forward to it tremendously.

Chairman: Well, before you look forward to it too immensely, let me ask you a question, and I ask the question because, on my reckoning, there have now been five broadcasting ministers since May 2006. That is a very high turnover. Do you think that these frequent changes help in making policy?

Mr Simon: I think I should have been appointed in 2005, but —-

Chairman: But Number Ten actually omitted to do so?

Mr Simon: They omitted to do so and, as you know, you will have to ask the Prime Minister about the appointment of ministers because that is his decision, not mine.

Chairman: Well, the resignation of ministers, on the other hand, is very much in the hands of ministers, is it not? You are not even going to take the Digital Economy Bill through?

Mr Simon: I have had great enjoyment and satisfaction dealing with it as it has been through all the various stages of consultation with stakeholders across industry and Parliament since I inherited the White Paper. The White Paper was published the week I was appointed, the Digital Britain White Paper.

Chairman: By your predecessor who also only lasted a year.

Mr Simon: I think he did an outstanding job actually, I must say. Having come in and inherited his output, I think Lord Carter did a very, very sophisticated, subtle and impressive job across a whole range of industry sectors.

Chairman: At any rate, you enjoyed it so much that you are not going to stay for a couple of months?

Mr Simon: It has been an absolutely tremendous pleasure and privilege. I think it is one of the best jobs in Government. I have lots of reasons that I am stepping down as I am deciding to do other things and I am also stepping down from Parliament.

Chairman: What are the other things you are going to do?

Mr Simon: I am going to run, if I can, to be the first elected Mayor of Birmingham, which will probably be a couple of years, but is a job worth doing and worth planning for.

Chairman: Well, as a Birmingham MP for 27 years, I am probably the person round this Committee who has most sympathy with that ambition, although I do not think the job actually exists, let alone you are going to win it. Quite seriously, do you really think that these swift changeovers of ministers actually do the policy process any advantage?

Mr Simon: I do seriously have to tell you that I am a junior minister and junior ministers, as you know with all your experience, are not responsible for the appointment of ministers, the policy towards the appointment of ministers or the length of tenure of ministers. You need to take that up with the Prime Minister; it is not a matter for me.

Chairman: Well, I doubt very much whether the Prime Minister is going to agree to come to this Committee, given all the other things he has got on his mind just at this period in Government, but never mind.

Lord Maxton: Do we know who your successor is going to be?

Mr Simon: I do not know.

Lord Maxton: Presumably, somebody will have to be appointed this afternoon if you are going this afternoon?

Mr Simon: Again, it is a matter for Downing Street, not for me or officials.

Chairman: So you are going this evening and we do not know who is going to take your place?

Mr Simon: I think it is fairly common procedure that it is after the one minister has resigned that the next one is appointed, so I assume there will be an announcement from the Prime Minister in due course about what arrangements will need to be made.

Chairman: Okay, I do not think we are going to get much further on this particular path. Let us ask you about the digital switchover. This is a short inquiry that we have conducted and most complaint, I think, has been about radio. There seems to be enormous uncertainty amongst the public about what is happening and indeed what the case for radio switchover is. We have just been talking to consumer groups and, just to give you some flavour of what they said initially, one said he could not see any advantage, another said it was difficult to see what the benefits are and a third said that they were concerned about the expense of throwing away sets, and I think that is one of the issues that has come through from some of our correspondence as well. What would you say are the advantages of digital switchover as far as radio is concerned?

Mr Simon: I think there are several advantages. Firstly, digital has practical and technical advantages of benefit to the consumer, so there is a whole range of extra functionality and interactivity that you get from a digital radio set that you will not from analogue. It is also the case that the FM infrastructure, the transmission infrastructure of FM, is ageing, FM is an old analogue technology, and the likelihood is that in the medium term the question will arise anyway of whether this infrastructure can economically be renewed and the likelihood is that it probably would not be economic to renew this infrastructure. What you would be faced with in that case would be a piecemeal disintegration of the FM infrastructure in a disorderly way and an inevitable move by the market towards digital. What the Government is, therefore, doing is trying to help manage this move in an orderly and efficient way.

Chairman: So what would you say to the member of the public who has written a not untypical letter to us in which he said, “We have acquired a large number of FM radios over the years, all of which work perfectly. Five of these are used regularly in different rooms. Why should we ditch these for no good reason?”?

Mr Simon: Well, firstly, they will not necessarily have to ditch them; it will depend what services they are using them to listen to, and it may be that there are different members of the family using different sets in different rooms at different times to listen to different services. It is reasonable to assume, therefore, that in a typical family some of those sets in some of those rooms will be used to listen to the kinds of local commercial services or community radio services which will remain on FM, indeed which will be expanded and have their presence secured on FM and remain available. Now, clearly it will be the case that, in order to listen to major national or large regional broadcasters after 2015, consumers will need some kind of upgrade to listen to digital. It is very likely that a relatively cheap, small add-on which converts an analogue set to a digital set will become available before the switchover date. We are talking to manufacturers, and I cannot guarantee what manufacturers will manufacture, but we think it very likely that a small, cheap converter will be available and people will purchase over time new sets.

Chairman: Well, we will come to that point. Can I just ask one broader point though than that. Ofcom commissioned a cost-benefit analysis of digital radio migration from Price Waterhouse. That report found that the benefits might outweigh the costs only after 2026. Is that the basis upon which you are planning as well?

Mr Simon: I think that the report that Ofcom commissioned was into the recommendations of the Digital Radio Working Group, which were different from those which eventually made it into the Digital Britain White Paper and the Digital Economy Bill, so, to be honest, it is not really a straight comparison because the Price Waterhouse report was not into what is going to happen, it was into a different set of recommendations by a different group.

Chairman: I hear what you say, but why has the Price Waterhouse report not been made public?

Mr Simon: Clearly, there has been a little bit of difficulty about this. There is no sense at all in which it was intended not to be made public. It is now on the DCMS website. It should have been on the DCMS —-

Chairman: In a redacted, blacked-out form.

Mr Simon: I believe that the form that it is in on the website is redacted to remove commercially sensitive information, which is the usual practice with commercially sensitive information, but I am told that the Committee has been supplied with an unredacted version by Ofcom, and any stakeholders who have asked for a copy have been sent a copy. We should have put it on the website more quickly. There were technical difficulties to do with the report not having been written internally and being supplied in the wrong format and so on which meant that it did not get on the website. There has been no intent whatsoever, and there is no intention, to keep private the report.

Chairman: Well, we, I gather, have received the report this very morning, so we obviously have not looked through it yet

Lord St John of Bletso: I noticed in the written evidence from DCMS that one of the challenges of the digital radio switchover will be converting the occasional radio listener rather than the avid listener who has already invested in DAB sets. There has been also a commitment to a further cost-benefit analysis of the digital radio upgrade. What is the timetable of this proposed new cost-benefit analysis, and will you wait for the outcome of this analysis before taking further decisions to go forward?

Mr Simon: I think the commitment with the digital radio upgrade is for a full impact assessment and a cost-benefit analysis particularly of the need for, the case for and the design of a possible digital radio help scheme. As to the sense in which there is a cost-benefit analysis of the whole programme, rather than a kind of discrete piece of commissioned work, like the report we were just talking about, this would be a constant, ongoing process of review which is starting this year and will be constantly reviewed, measured and updated as the programme unfolds.

Lord St John of Bletso: We have, as I understand it, 90 per cent still on analogue and ten per cent on digital, but have you estimated the effects of the costs and revenues to the different radio stations and the bodies arising out of digital migration, and how will profitability change and who will benefit? That is really what we are trying to get at.

Mr Simon: I think the percentage already listening on digital is higher than that, I think it is more like 20 per cent, and we are committed to not switching over until listenership on digital is at least 50 per cent and coverage is at least comparable to FM, which would be 98.5 per cent. Can you just tell me a bit more as I was not quite sure exactly what you wanted in your subsequent question?

Lord St John of Bletso: It was just the phasing of the transfer as far as not just the timing of the cost-benefit analysis, but what the effects would be and the costs and revenues for the different radio stations and others.

Mr Simon: The intention is that the radio market be much more distinctly than it currently is organised into three distinct tiers, so a national tier at the top, which would be digital, a large regional tier, which would also be digital, and then at the lowest end a local tier, which would be small, local commercial broadcasters and community radio stations who would remain on FM. The effect would be that some currently medium-small commercial broadcasters would probably grow their broadcast areas and migrate on to digital. Some of that size could potentially shrink slightly and stay on FM, the underlying dynamic being that it is much cheaper to stay on FM than go on to digital, and there would be small commercial broadcasters for whom it would not be economic to migrate to digital which has inherently a much bigger footprint.

Lord Maxton: I am not quite clear where the BBC would fit into that because they provide national and local services.

Mr Simon: If I may say so, my Lord, that is a very good question and the answer is that in the crucial matter of building out extra transmitter infrastructure so that the coverage of digital matches by 2015 the current coverage of FM, which is about 98.5 per cent of the country, the assumption is that the commercial sector and commercial operators would fund that build-out as far as it was commercially and economically viable, and then the assumption is that the BBC, with its obligation to provide a universal service, would fund the probably seven or eight per cent of the build-out which was not commercially viable.

Lord Maxton: But they were only talking about 90 per cent, the BBC were last week.

Chairman: Is it going from 90 to nearly 100 per cent?

Mr Simon: Very roughly. It is between 90 and 98.5 which, it is assumed, would not be commercially viable.

Chairman: But you are assuming that the cost of that will be taken from the licence fee?

Mr Simon: I am assuming that the BBC would be building those transmitters. We are talking about a cost of probably between £10-20 million a year.

Chairman: So it would be taken from the licence fee?

Mr Simon: I think the assumption is that the BBC would be able to absorb that within its current budgets.

Chairman: Well, the BBC said to us that actually they would like to talk to you about the licence fee, so there may be a constructive dialogue to be had there!

Lord Maxton: Obviously, what you are saying does imply a fairly major restructuring of the radio industry. I assume you are going to be consulting on this, are you?

Mr Simon: We are, and have been, consulting continuously. I have had two summits with small commercial operators who, at the beginning of the process of talking to them, were a bit concerned.

Lord Maxton: Can I link this to one of the Government’s other quite right policies, which is extending broadband to everybody. Where does that fit into radio because it seems to me that people are already selling internet-available radios so that you can pick up radio stations from wherever?

Mr Simon: It is all part of the same, I think, pretty relentless drive towards digital, but they are different strands of the same broad movement rather than being directly interlinked or dependent, so internet radio listenership forms part of the digital radio listenership, but it actually forms a very small part of the digital radio listenership and there is still a case and a clear need for an explicitly transmitted-over-the-airwaves radio digital output as well; you
cannot do it all on the internet.

Baroness McIntosh of Hudnall: I just wanted to go back to two things that you said in your last couple of answers, Minister, and the first one was about the 50 per cent target for digital listenership before making the decision to migrate to digital. We had evidence from the witnesses who were here immediately before you that there is a strong likelihood that the 50 per cent of people who, at that point, would not have taken up the digital option may include a high proportion of vulnerable listeners. Do you have any observations, or indeed has your Department done any research, to demonstrate whether or not that is likely to be the case? Also, you made the point about the BBC becoming responsible for making up the shortfall between 90 and 98.5 per cent, and the evidence that they gave us last week demonstrated, or they believe it demonstrates, that the level of investment to produce that last eight to ten per cent’s worth of coverage is enormously much greater than the level of investment that has been necessary, or will be necessary, to arrive at 90 per cent. I think, from memory, they were talking about having 90 transmitters currently and needing to invest in a further 140 in order to meet that remaining ten per cent. That is a pretty big ask, and I just wonder whether you would, in the light of that, be prepared to reconsider your answer to Lord Fowler about where the money is going to come from.

Mr Simon: If I could take those two, in the first case we have not commissioned research about that yet. Intuitively, I suspect that you are probably right and that there will be a disproportionately high number of, for instance, older, disabled or other vulnerable people in the cohort that is not digital by the time we switch over, so, for that reason, we will be commissioning a full impact assessment and cost-benefit analysis, looking into exactly those issues and using that information to determine, and what would be the details of, some kind of digital switchover help scheme in just the same way that we commissioned research which informed the digital TV switchover Help Scheme that we have ultimately put into place and which is, I think, widely held to have been pretty successful. On the second question, we have been talking to the BBC very closely and very recently about this and, no, I am pretty clear that what I said initially was right, that we are talking about costs of somewhere between £10-£20 million.

Baroness McIntosh of Hudnall: Sorry, £10-20 million per annum, you said earlier?

Mr Simon: Per annum, yes.

Baroness McIntosh of Hudnall: Over what period? An additional net £10-20 million spend for the BBC into an indefinite future or over a specified period of time?

Mr Simon: No, over the period of the switchover, after which the BBC’s costs would decline by up to £40 million a year because they will only be transmitting on one platform and the cost of analogue will be deleted. The basic principle is that the market will pay the cost as far as it is viable. For those people who live in areas, presumably almost always more rural areas, where it is not commercially viable to build out digital transmitters, then the BBC, because it has in its Charter an obligation to provide a universal service, will likely be bound to build out those transmitters. In our conversations with them, they have recently seemed to recognise that and I certainly have not had a sense from them that they believe that the cost would be prohibitive.

Chairman: I am bound to say, it is not the flavour of the evidence that they gave to us last week. I think Lady McIntosh makes an extremely good point here. Rather than continuing this, we had better just recheck with the BBC what exactly it is that they want and require here, but, I have to say, your evidence is slightly at variance with what the BBC were telling us.

Baroness Howe of Idlicote: I think quite a number of the questions I was going to ask have been answered, but I am still not clear about this £10-20 million that you are talking about with the BBC. Presumably, this will be extra money over and above what they are getting at the moment that you are negotiating with them?

Mr Simon: This is not money that we anticipate giving to them. It is a cost which we anticipate will accrue to them when they are building out new transmitters in order to meet their obligation in respect of universality.

Baroness Howe of Idlicote: So there will be a difference in that they are prepared to go up to 90, but not beyond that?

Mr Simon: The commercial sector will build out to 90 per cent and for the rural areas, the seven or eight per cent beyond that which the commercial sector would not build to because it would not be commercially viable, the assumption is that the BBC will build out that step further and that that will cost them about £10-20 million a year during the period of switchover, which they will later recoup as they make savings from not transmitting anymore on analogue.

Chairman: So you are cutting the budget of the BBC by £10-20 million in that period?

Mr Simon: Well, I do not have any control over the budget of the BBC.

Chairman: You are telling them what to do!

Mr Simon: I am not telling them. I am just telling you what the assumptions are about where the likely build-out will come from.

Baroness Howe of Idlicote: I also want to go back to this whole business of just when the radio switchover is actually going to happen as there are huge question marks over this. I know the target is 2015, but, as you probably also heard, a lot of people do not even want it to happen. If we are looking at FM and the extension of time that may well be required, is the Government prepared to give a guarantee that FM will remain right the way through whatever period it is, even if it takes another ten years or even longer for the total switchover to take place?

Mr Simon: I think the Government can guarantee that FM will remain for the foreseeable future. The Government cannot give guarantees indefinitely, but for the foreseeable future the part of the FM spectrum which will be used for local commercial and community radio will continue to be available for that.

Baroness Howe of Idlicote: Well, could you please define for me the ‘foreseeable future’? How far beyond 2015 would that be?

Mr Simon: I cannot put a number on it, but I would have said it would be well beyond 2015, well beyond.

Baroness Howe of Idlicote: Well, 2020, say?

Mr Simon: My personal guess, for what it is worth, is probably well beyond that.

Baroness Howe of Idlicote: You are probably aware that there will be, and there are already, efforts to get on the face of the Bill a guarantee that it will stay for as long as that.

Mr Simon: A point I would make is that, as far as we are aware, we cannot find any evidence anywhere that the FM spectrum will be, going forward, of any particular economic value to anybody. We are not aware of anybody being likely to want it and certainly to want to pay anything in order to use it for anything else. As long as it remains viable for people to use it for radio, as long as people want to continue to use it for radio and as long as the infrastructure still works, then there is no reason at all why it should not continue. It could be another 50 years.

Baroness Howe of Idlicote: But you did in fact say that it was an ageing infrastructure. Have you got any guess about how long it would remain a viable infrastructure to be used?

Mr Simon: I honestly do not know. There is no sense whatsoever in which I am prevaricating or equivocating, there is nothing that I am trying not to say, but I simply cannot give you any certainty because there is no certainty.

Baroness Howe of Idlicote: I wonder whether Mr Smith might have an answer.

Mr Smith: I have nothing really to add to what the Minister has said. Again, and it is a personal view, but I would expect FM to be available well into the future and I think I would share the Minister’s view of beyond 2020, but we do not know precisely when. The infrastructure is an ageing infrastructure, but who knows how long it might last.

Lord Inglewood: I would just like briefly to turn back to the question of extending the DAB national network because it has been measured in the discussions so far by reference to the percentage of the population, but, since the population is scattered relatively randomly across the country, of the final ten per cent of the population, how much in terms of the total number of transmitters and transmission stations does that represent? In fact, in terms of the total cost of rolling this out, that last ten per cent is going to cost a great deal more than the first ten per cent, is it not?

Mr Simon: In answer to the first question, nobody knows how many transmitters —-

Lord Inglewood: No, but just an order of magnitude; I am not interested in specifics.

Mr Simon: I do not know.

Lord Inglewood: But it is much more than ten per cent of the total cost of the thing, is it not?

Mr Simon: Certainly, you would expect for the non-commercially viable, rural final percentage that the unit cost would be higher than doing the middle of big cities obviously, yes.

Baroness McIntosh of Hudnall: Just on the question of who is listening, there appears to be some evidence, including from Ofcom’s research, that most people who listen to the radio at the moment are pretty happy with what they have got now and that actually this notion of extensive choice and interactivity, which is the key selling point really of digital radio, as you said yourself at the beginning of your evidence, actually does not weigh that heavily with most consumers. We also have heard evidence from John Myers, who was commissioned by the DCMS to report on this, that there is a considerable oversupply of radio services in the sense that there are too many stations out there fulfilling need which is perhaps not as great as they need it to be to be commercially viable, so are you convinced that there really is the consumer-led demand for a digital switchover, or is this really being driven by the fact that the technology exists and, because we can do it, we will do it?

Mr Simon: In the first instance, I think the clearest evidence that there is a demand for digital radio is that in the last ten years ten million digital radio receivers have been bought, and many of them in the earlier years quite expensively and many of them repeat purchases. For a new technology from a standing start where the existing technology remains in place and is dominant, I think that is clear evidence of significant demand and it is a market that continues to grow.

Baroness McIntosh of Hudnall: Before you go on from that, could you just tell us what the percentage of the absolute number of radio sets is, as far as it can be estimated, in the country?

Mr Simon: It is impossible to say because there are wildly different estimations of how many radio sets —-

Baroness McIntosh of Hudnall: Well, on what do you place reliance?

Mr Simon: The estimations of the number of analogue sets in existence, which I can think of having heard, varies between about 40 million and 100 million plus, and it is a technology that is 100 years old, so that is a massive accumulation of equipment and it is, therefore, very difficult to compare with a ten-year-old technology. Out of maybe 50 million meaningful analogue sets, if there have been ten million digital sets sold in the last ten years, I think that shows significant consumer demand for a new technology. On the second question about whether the market is oversupplied, firstly and fundamentally, the size of the market is a matter for the market and for the consumer and it is not ultimately my job to manage the size of the market. However, one thing that we are trying to do with this move, as I have said, is to stratify the market into large national, large regional and very local services, which should mean that, rather than everybody in their rather disorderly fashion competing perhaps on unequal terms in one chaotic market, people can do business more efficiently in a more discrete market, and local commercial radio stations, for instance, can do local commercial advertising that will not overlap and be in competition with big national chains and so on.

Baroness McIntosh of Hudnall: So, leaving aside just the generality of choice as a benefit in itself, if you had to say what the benefits are to consumers of the particular way in which the Government is driving the digital switchover in radio, what would you put as your two or three most significant benefits? Would it be, for example, an extension of nationally available commercial broadcasters on digital platforms, or what would it be?

Mr Simon: I think it would be, firstly, that the technology offers additional benefits, so it offers for most people more stations more clearly defined and a better mix of the different tiers, additional functionality, interactivity; digital radios do things that analogue radios do not. Secondly, I think it offers the consumer an orderly, consistent and coherent pathway to a digital future which is inevitable. The FM technology is ageing and the economics suggest that it would not be economic for major broadcasters to replace that infrastructure nationally and, rather than let it disintegrate in a piecemeal way and let it be replaced in a piecemeal way and have consumers all over the country who no longer can get the services that they have been used to, I think it is appropriate for the Government to try and manage this transition in a coherent way.

Chairman: What I do not quite understand is that you talk about new services being provided, but they are going to be provided in an industry, or you are relying on them being provided in an industry, a particularly commercial industry, which is going to be competing with the BBC, which obviously one wants to see, but that commercial industry itself is struggling, not to survive, but certainly struggling in very, very difficult economic circumstances at the moment. I do not quite see where this expansion is going to come from.

Mr Simon: I am not saying that the aim of the policy is to expand the market for commercial radio. The aim of the policy is to manage the transition in a way that works both for the businesses of the broadcasters and for the consumers and to manage the experience in a way that works for the consumer. As you say, the commercial radio market in terms of revenue has shrunk by a third over the last ten years as advertising revenues have shrunk for all broadcasters, print media and so on. It is a business in which people are under real pressure and that is why, among the overwhelming majority of commercial broadcasters, there is a strong support and an appetite for a clear, managed, relatively swift, but not rushed, pathway to digital where, although in the first instance they will have some additional cost, they can see a future in which they can do more business and make more money.

Lord Inglewood: Just really arising out of that and something you said earlier, it is not part of your case, is it, that, if the analogue network were not ageing and hence degrading, that would not be the reason for moving to digital? The reason for moving to digital is not because the analogue network is simply breaking down, is it?

Mr Simon: The fact that the FM infrastructure will need to be replaced in the short to medium term and that it looks like that replacement would not be economic is certainly one of the underpinning factors.

Lord Inglewood: But that goes back to the question of Lady Howe’s, does it not, that the foreseeable future is actually defined by the capability of the FM infrastructure to deliver the services it currently does?

Mr Simon: I am not sure I understand the question. I understood her question.

Lord Inglewood: Yes, but she said, “How long is it going to go on for?” and you said, “For the foreseeable future”, which was fair, but I think in fact that the way it is defined is that it will go on, according to the evidence you have subsequently given us, for as long as the FM transmission infrastructure is capable of delivering it. When it collapses, that is —-

Mr Simon: They are two different points though. There is the question of how long it will be possible for some people locally to continue to broadcast on FM, which is a different question from at what point do businesses need certainty about the capital investment decisions they might need to take in the future to renew the major national infrastructures.

Lord Inglewood: Sorry, but I may have misunderstood your evidence, in which case I apologise, but I thought what you said was that you did not believe that the industry was prepared to invest for the further life that the FM infrastructure would require.

Mr Simon: That is correct.

Lord Inglewood: If that is the case, why are they prepared to invest in the infrastructure for digital, which is part of the proposal that you are describing to us?

Mr Simon: Because renewing an old technology with its limited functionality does not make economic sense to them, whereas investing in a new technology with additional functionality does. When it comes to making the investment decisions, they are not going to buy the old kit again, they are going to buy the new kit.

Lord Inglewood: I understand the argument, thank you. The other thing I wanted to ask you about was right at the outset when there was a bit of verbal sparring going on between yourself and our Chairman, reference was made to things, such as cheap sets and set-top boxtype devices that would enable analogue radios to pick up digital and so on, and you used the subjunctive, that they might well become available, it was very likely. Is there any assurance that you have been given by any of the manufacturers about the actual provision of these products and, if there is not, as events move on, if it becomes apparent that a lot of this hardware may not be available, will that delay and/or postpone any digital switchover?

Mr Simon: Their adaptor-type technologies are already available for cars, so you can already buy a little thing in Halfords that you can put on your analogue car radio that will enable it to receive the digital signal. I do not think that you can easily get hold of such a product to adapt a domestic transistor radio, but the technology already exists. I am led to believe that they would not be difficult to manufacture and there is no reason to believe that they would be. We are talking to manufacturers who say that such products are on the way.

Lord Inglewood: Do you know in what sort of price range these things might be?

Mr Simon: I honestly do not off the top of my head.

Lord Maxton: On Amazon, £65.

Mr Simon: Currently?

Lord Maxton: For the car one, and you have to buy an aerial as well.

Mr Simon: We expect all of these prices to come down a lot.

Chairman: They have already come down quite a bit, have they not?

Mr Simon: Yes, they have come down tremendously. Digital radios themselves, the cheaper sets, you can now get a set for less than £25, which is very, very greatly less than the cheapest even a couple of years ago. As the market expands, the costs will come down, and it is expanding all over Europe. We are also working with, and encouraging, manufacturers to use, without being too technical, what is called the ‘World DMB Profile One chip’, which is compatible all across Europe, and that will give them great European economies of scale which again should make it easier for them to produce even cheaper sets and adaptors. In answer to the question, if nobody produces these things at affordable cost, would that delay switchover, I think it would depend what effect that had on the market. If that meant that nobody bought them and nobody bought any digital radios either and we did not get over the listenership threshold, then yes, it would delay. If it simply meant that people did not bother with an adaptor, but bought new digital radios, then it would not.

Lord Inglewood: I sense you sense that this is not actually going to be a problem.

Mr Simon: That is my belief.

Baroness Eccles of Moulton: I think, Minister, it is quite clear to us that there is going to be plenty of equipment around for converting, multi-chip, et cetera, et cetera, but why are we continuing to base the whole of our digital radio switchover on what is becoming an outdated system, which is DAB, as opposed to what other countries have done, which is either to scrap DAB or start off with DAB+? Why have we allowed ourselves to get caught in being committed in an early stage of the development of the switchover to what is now not the most up-to-date and modern form of broadcasting?

Mr Simon: That is a very good question which lots of people ask. The answer is that we were in this country by far the earliest adopters as a market of digital radio and we took it up far more quickly and far earlier than anybody else, as a result of which the amount of stock in the market that you would have to write off in this country is vastly greater than European comparators. There are ten million DAB sets, many of which have been bought at early adopter prices in the market in the UK and, if we abandoned DAB, it would mean that all those early digital adopters had their digital investment written off after a very few years, which just seems really counterintuitive in terms of how to drive the market towards digital and hardly also would seem likely to inspire much confidence in those people to make them very likely to buy another digital radio of the new standard. What we are saying is that the new sets henceforth should have the DMB World Profile One chip in, which is DAB, DAB+ and DMB compatible, and it would mean that you could use it anywhere in Europe and receive all that mix of signals. It does not preclude us in the future from moving to a technology which is greater than DAB, but it is a cost-benefit decision that has had to be taken and the clear consensus, not just in the Government, but of the regulators and stakeholders, has been that writing off the ten million DAB sets that have already been bought would be counterproductive.

Baroness Eccles of Moulton: Is including the new chip in any radio that comes on to the market from hereon going to be mandatory in the same way as fitting seatbelts in cars became mandatory?

Mr Simon: Not in the same way in the sense that, I think, seatbelts in cars was a piece of primary legislation, but mandatory in the sense that we will work with manufacturers in order to draw up the technical specifications for the new generations of sets, and they will be the formal technical specifications which will be adopted, hopefully, European-wide, so in that sense mandatory.

Baroness Eccles of Moulton: So you would not be able to sell the set if it did not meet the technical specifications?

Mr Simon: You would not be able to sell an approved set. It would not be a crime to sell a set, but it would look like a dodgy set.

Lord Maxton: France is setting the law which says that by 2012, I think, all radios sold must be DAB+ and that would include all car radios, which is the market area which we really have not looked at, but it is a very important area. Is it right that 20 per cent of all radio listening is in cars? That is a very large percentage, but it is a very difficult area to switch from FM to digital, even with the device which we have talked about already, is it not?

Mr Simon: Our targets are switchover by 2015 and new cars all being digitally radio-ed by the end of 2013. That is our clear target. Now, obviously, even if all new cars are digital by 2013, that still leaves the majority of the car stock analogue for a while beyond 2015, at which point one hopes that the price of the adapters, which you can already buy in Halfords, has come down considerably from the price that you mentioned on Amazon. I did not think they were that expensive in Halfords.

Lord Maxton: Well, they are £79 in the shop and, to be honest, with the reviews they have had of them, you have to almost buy an external aerial.

Chairman: I would not take him on on this!

Mr Simon: I am not going to, not for a minute am I going to! He is obviously speaking with some authority.

Lord Maxton: It will cost you another £12 or £13 on top.

Mr Simon: All I can say is that manufacturers assure us that this technology will be getting cheaper, better and more widely available over the three years before cars go all digital and over the five years until digital switchover. That is a long time for them to make big improvements.

Lord Maxton: I have not got one yet, by the way!

Mr Simon: I guessed!

Chairman: But you said that the target date is 2015?

Mr Simon: Yes.

Chairman: That remains the target date, does it?

Mr Simon: That is the firm target.

Chairman: That is a firm target date and, therefore, will that go into the Bill as a date, the Digital Economy Bill going through at the moment?

Mr Simon: Is it not on the face of the Bill?

Mr Smith: The Bill sets out the conditions which would have to be met for the target to be set.

Chairman: But I think I am right, am I not, that 2015 is not there as a target?

Mr Smith: It is not on the face of the Bill, you are absolutely right.

Chairman: Why not?

Mr Simon: Because it is a target.

Chairman: An aspiration?

Mr Simon: No, I am happy with the word “target”. It is a firm target, but it is not an inflexible or dogmatic target. It relies on our having met the listenership test, met the coverage test and, if we do not meet those tests, then we will not hit that date. We believe that we can, and should, hit that date.

Lord Inglewood: It will not be brought forward?

Mr Simon: That is very optimistic.

Lord Inglewood: I am just asking, not suggesting.

Mr Simon: I think it is unlikely.

Chairman: So you may miss the target. That is basically what you are saying.

Mr Simon: I am saying that, if we do not satisfy the criteria, then we will not do it if the nation is not ready.

[this is an uncorrected and unpublished transcript]

NORWAY: every fifth radio sold is an internet radio, every eleventh is DAB

In Norway, sales of internet radio receivers are booming. During the final quarter of 2009, 22% of radios sold were internet radios, up from only 1% a year earlier, according to Norwegian website Sandnesavisen. By comparison, only 66,000 DAB radios were sold in 2009, 9% of the total 729,000 radios sold during the period, according to data from the Electronics Industry Foundation. Additionally, 200,000 mobile phones were sold in Norway during 2009, none with DAB capability but many with integrated FM radios.

Erik Andersen, information officer for the Electronics Industry Foundation, said: “We estimate that there are somewhere between 12 and 15 million FM radios that are in regular use around the country while, in comparison, only approximately 290,000 DAB radios have been sold in recent years.”

Andersen is not surprised by the rather low DAB radio sales, and finds it problematic that a date for FM band switch-off has not been announced which could be referred to. “We have no desire to mislead customers so, as long as politicians do not give us a switch-off plan, we advise enquiring customers to buy an FM radio,” said Andersen.

Jarle Ruud, acting general manager of Digitalradio Norge, the organisation charged with ensuring a speedy and smooth transition from analogue to digital radio in Norway, said: “This is a classic ‘chicken and egg’ situation, both in terms of sales volumes versus a switch-off date, and the channel selection on DAB.” Just as consumers are hesitating to buy a DAB radio before the government announces a switch-off date, Ruud thinks there are many radio stations that refuse to invest in digital transmission equipment because of the potentially lengthy and costly period of dual distribution.

The sales trend came as no surprise to Øyvind Vasaasen, media manager at NRK (state broadcasting) and chairman of Digitalradio Norge, who said: “This is what we predicted. We have remarked to the authorities that sales appears to have stabilised at around 60,000 DAB radios sold per year, and this is also the result for 2009. It shows that the sales trend is far too slow.”

Geir Friberg is managing director of Norway’s largest local radio group, Jærradiogruppen, which owns more than 20 of the approximately 150 local stations in Norway. He said: “There is really no great difference between FM and DAB. There are too few radio stations that broadcast on DAB today, and listeners cannot hear the difference between FM and DAB.” Friberg believes that adding more FM stations may even be a better policy than DAB.

Per Morten Hoff, general secretary of IKT Norge (Norway’s IT industry interest group), queried the accuracy of the published sales figures: “More and more consumers have eyes for internet radios, and the Norwegian company TT-Micro has alone sold 20,000 web radios. Since these radios can also receive FM, DAB and 13,000 internet stations, they are strangely classified as ‘DAB radios’ in the statistics. This is apparently to show that DAB is not a total failure. The true DAB sales are probably no higher than 40,000 units, and that figure is getting smaller. There is also the riddle that sales of mini-TV’s are included in the sales statistics of DAB radios.”

Jørn Jensen, president of World DMB Forum, responded: “Hoff does not know what he’s talking about. Radio broadcasting on DAB and DAB+, as well as mini-TV’s in DMB, all use DAB technology.”

At the beginning of February 2010, the Norwegian media regulator, Medietilsynet, submitted a 145-page document to the government on the digitisation of radio broadcasting. This is in preparation for a White Paper on digital radio that will be published by the government during 2010. The report was commissioned to map the Norwegian local radio industry’s opinions on the migration to digital radio and how it could be achieved. It collated responses from 55 parties and it concluded:

“The results of the survey reveal that virtually all local radio licensees believe that the digitisation of local radio will have economic consequences for them as businesses. The players fear that a transition will be so costly that only a few of the current licensees will survive digitisation. The consequence may be that ownership diversity disappears and that the market is left with big group operators. Besides mentioning competence-building, information and predictability, the majority of licensees believe that the most important measure the government can contribute to the digitising process is financial support in one form or another.

Local radio licensees who participated in the survey are roughly evenly split down the middle on their view of whether local radio should be digitised or not. Those who are negative to digitisation weigh the economic aspect heavily. When asked what distribution platform they see for themselves as the primary platform for local radio in the future, 52 percent responded analogue broadcasting via the FM band, 33 percent broadcasting via a digital platform such as DAB, DRM, etc and 9 percent broadcasting via the internet……”

“Amongst local radio licensees, 78 percent are negative about a switch-off date for analogue local radio broadcasting. 18 percent are positive about a switch-off date.”

Vigleik Brekke, chairman of the Norwegian Association of Local Radio (NLR) said that there was no economic reason for many of his 150 member stations to migrate to digital transmission. “Closing FM radio will create problems for stations,” he said. “They will not be able to survive.”

Professor Lars Nyre of the University of Bergen’s Institute of Media Studies said he was sceptical about DAB, especially as FM radio seemed to be perfect for listeners.

Asked whether the government’s White Paper will include a switchover date, Norwegian Culture Minister Roger Solheim said: “This is an important issue, and we aim to present the facts in 2010. One of the key questions we want to work with in the White Paper is whether we should fix a switch-off date.” Asked if his predecessor Trond Giske’s policy still held sway that half of Norway’s households should own a digital radio before a switch-off date is announced, Solheim said: “It is certain that digital radio will come, we see that too, in the developments. The question of the timing, and the state’s role in it, we must come back to in the White Paper.”

According to industry data, one in three households in Norway buy a new radio each year. Each household owns between 6 and 7 radios.

Internet radio: denigrate it, ignore it, marginalise it … consumers will still listen

It was a surprise to find that the entire front page of the most recent issue of the World DMB Forum’s global newsletter (‘Eureka!’) was filled with an article that did not extol the virtues of the DAB/DMB platform, but instead tackled the online radio platform and drew the conclusion that the internet “will NOT replace traditional broadcasting”. The article, entitled “The Future Of Radio”, sought to debunk the assertion that “the internet is the future of radio”.

It stated that the BBC iPlayer “allows the UK public to access almost all of its radio and TV programmes broadcast during the previous seven days”. This is inaccurate. The iPlayer offers nothing like “almost all” the BBC’s radio and TV output. Indeed, for some of the BBC’s radio and TV networks, the selection of content remains remarkably thin (mostly due to rights issues).

The article continued: “Given the outstanding success of the BBC’s iPlayer, it is surprising to learn from RAJAR’s latest audience figures that ‘radio via the Internet’ (in all its forms: live streaming; on-demand services and podcasting) accounts for only 2.2% of radio listening in the UK.

This is untrue. The RAJAR 2.2% share figure ONLY includes simulcast live streams of the BBC and UK commercial broadcasters. It does not include on-demand services; it does not include podcasts; it does not include listening to online radio services such as Last.fm, Spotify and Rhapsody; and it does not include listening to audio from overseas broadcasters. There is a detailed section on the RAJAR web site that explains these facts. RAJAR has never claimed that its data for ‘internet’ listening includes anything other than simulcast live streams of BBC and UK commercial radio stations.

The article then drew the conclusion: “Taking these differences in penetration into account shows that DAB listening in the UK is 10 times more popular than listening via digital TV or via the internet.” However, it is unclear what the phrase “10 times more popular” is trying to imply. Is that ‘10 times more listening’? Or maybe ‘10 times more reach’?

Interestingly, exploring the latter metric, RAJAR’s own research (as part of its MIDAS survey, rather than the main diary survey) found in December 2008 that the weekly reach of all internet-delivered radio content in the UK was 14%, compared to the DAB platform’s weekly reach of 17.8% during the same quarter (see graph below). Ten times more popular? The platforms were almost neck-and-neck in the ‘reach’ metric. I wrote about this research a year ago. It is the closest we have for now to a like-for-like comparison that includes all forms of audio delivered by the internet.

  

The most recent reach data for the internet platform in the above graph derives from Q3 2008 because RAJAR has not publicly released comparative data derived from its two subsequent MIDAS surveys (which are now only available on subscription).

RAJAR was keen to stress in its press release accompanying this week’s latest MIDAS 5 survey that:

74% of those Listen Again listeners said the service has no impact on the amount of live radio to which they listen, while half said they are now listening to radio programmes to which they did not listen previously”.

Somehow, the Daily Mail managed to mangle this factual statement into something that, yet again, portrayed the internet platform as an aggressor against DAB:

Rajar says the figures do not mean people are abandoning traditional or DAB radio sets but that more Britons are trying and using online stations as well.”

  

The problem the radio industry faces with the RAJAR audience metric is that it cannot have its cake and eat it. Either it chooses:

• to restrict RAJAR to measuring ‘traditional’, live radio and accepts that, as a result, the data will inevitably show that listening to ‘traditional’ radio is in continuing decline (which is RAJAR today, see graph above); or

• to expand the RAJAR metric to measure ‘audio’ consumption that includes on-demand and podcast content, as well as non-traditional radio such as Spotify and Last.fm, thus demonstrating that total listening is not at all in decline but, on the contrary, has been enhanced by audio content increasingly consumed via non-broadcast platforms and ‘on the go’.

For the BBC, Director of Audio & Music Tim Davie hinted at the last RadioCentre conference that he would be interested to see RAJAR extended to encompass time-shifted and downloaded audio, both of which account for an increasing proportion of BBC radio listening.

For its part, commercial radio has shown no interest in advocating such a re-definition of the RAJAR metric. Not only do its offerings of time-shifted and downloadable audio remain miniscule compared to the BBC, but it is locked into a strategy to maintain its ‘walled garden’. Understandably, it has no desire to demonstrate to the world that it is losing listening to competitors’ time-shifted audio and online ‘radio’. UK commercial radio has enjoyed a nice little over-the-air duopoly from 1973 until recently – best just to pretend that it remains one of only two games in town.

The paradox here is that commercial radio is busy presenting advertising agencies and potential advertisers with RAJAR data that only tell part of the story of how and what audio people are listening to in 2009. However, once their meetings with commercial radio people are over, those same advertisers and agencies will inevitably be busy booking advertising with all sorts of online media, including Last.fm and Spotify. They know precisely what opportunities are out there in the wide world beyond traditional broadcasting.

Simply ignoring new businesses that are competing for your listeners’ attentions is not going to make them go away. Sticking your head in the sand can only have the effect of devaluing RAJAR as a useful and accurate metric in the long term.

Remember King Canute.

FRANCE: Digital radio postponed until at least year-end 2010

After a period of uncertainty about a timetable for the launch of digital terrestrial radio in France, the regulator has finally admitted that the first transmissions, which had been scheduled to take place this month, will be postponed until at least year-end 2010.

During an online chat yesterday, Michel Boyon, president of the CSA [France’s media regulator], said: “While everyone recognises the need to act quickly, despite the current economic challenges, it will be year-end 2010.” He argued that “if radio does not go digital, It will slowly decline” and noted that “internet radio is very good, but it is totally inadequate to meet the demands of listeners.”

Nevertheless, the French press seems unconvinced that digital radio will ever happen.

Digital radio silence is delayed!” said the headline in trade magazine SatMag, which commented: “After having been delayed for years in favour of digital television, digital radio is taking too long and is being overtaken by other technologies.”

Too expensive, digital radio postponed indefinitely,” said the headline of Agence France-Presse the day before Boyon’s announcement. It added: “The latest figures from Mediametrie confirm the change in radio listening habits: almost 50% of listening takes place on the move, and a quarter of the population has already listened to radio via the internet. During the last year, the numbers listening to radio via mobile phones has increased by 50%.”

Has the internet killed the digital radio proposal?” asked the headline in rue89. Francoise Benhamou, professor of economics at the University of Paris 13, commented: “Consider that a cost of 600m to 1bn Euros [to implement digital terrestrial radio] over ten years is viable only if [radio] advertising revenues increase by 20 to 25%. Such a forecast would be very risky given the uncertain economic background and the competition from the internet for advertising revenues.” She added: “Many of us already receive radio broadcasts, live and on-demand covering a wide range of content, as well as associated interactive services, by connecting via broadband. Do we really have a need for digital terrestrial radio?”

Professor Benhamou concluded: “This situation does not please everyone, particularly the CSA [media regulator] who saw [digital radio] as an opportunity to extend their domain …”

It sounds all too familiar to us in the UK.

France: “Let’s not mess up digital radio”

In France, Le Monde newspaper published an opinion piece last week written by Pierre Bellanger, founder and president of commercial radio group Skyrock, and Sylvain Anichini, former director general of state-owned Radio France:

LET’S NOT MESS UP DIGITAL RADIO

The powers that be are asking themselves a question about the transition to digital radio – if digital terrestrial television is a success, why would the transition to digital terrestrial radio not be a similar success?

In reply, experts have suggested there are differences between digital television and digital radio. Digital television is nationally operated and is being introduced nationally, whereas digital radio is being planned region-by-region with no certainty for radio operators who must apply for digital spectrum. Digital television offers three times as many free channels as analogue, whereas digital radio offers only a marginal increase over the wide choice available on analogue. Digital television was launched with a new generation of TV receivers – flat screens and high definition – and with adaptors for existing equipment. This is not the case for digital radio – digital radio receivers are as sexy as bricks and 140 million analogue radios will have to be thrown away.

Furthermore, digital television launched just when the medium was exploiting new sources of advertising revenues – once the preserve of radio – and when purchasing power was growing in line with the economy. Whereas, the transition to digital radio is being implemented just as the radio industry is reeling from the 2008 financial crisis and household spending is in decline. Finally, the television sector received significant financial help to fund its digital switchover. For digital radio, the subject of funding has been mentioned, and even said to be desirable, but there has been no promise to date. Public funding is not there to support the public will.

These facts have not stopped the powers that be, who have promised to overcome these obstacles. Driven by legislation, they have proceeded towards the launch of digital radio by involving key radio industry players in their strategy to select both a digital radio transmission standard and the most appropriate waveband to use. Applications have been submitted by radio opertaors for the first digital radio areas and there will be a selection process, just as for analogue radio, with licences awarded to the candidates of choice.

This process involves a substantial number of declarations of intent as to the magic of ‘digital’ in a concept synonymous with modernity. Perhaps we are forgetting somewhat that the CD, also digital, belongs more to the past than to the future ….

We are where we are. At the moment of truth when ‘poetry’ must give way to number-crunching and it seems that national digital radio transmission will cost at least 3 million Euros per annum, adding up to a total 50 million Euros per annum for the main radio groups. Additional transmitters are likely to need to be added to alleviate pockets of poor reception. And the absence of real competition between transmission providers offers little hope of reducing these costs. Finally, no new tangible sources of radio advertising are anticipated, and broadcasting will begin without a significant body of digital radio receivers in the market …

This kind of investment – more than 250 million Euros over seven years – might be justified if it could be amortised over two future decades that offered technological and economic stability. But we presently live in the midst of a complete revolution: the emergence of mobile internet access. This offers consumers the ability to connect anytime, anywhere, without interruption, to the internet via the airwaves.

The logic of the mobile internet is redefining the physical distribution of information and is disrupting traditional media and telecoms. The fixed internet has already changed our present, and the mobile internet is opening up the future. Radio is fully participating in this mutation, with radio distribution adapting to the internet protocol with ‘IP radio’.

The future is already in our hands: it is the iPhone. This revolutionary handheld device has allowed the internet to break into the mobile environment via existing communications networks. It provides access to thousands of radio stations, personalised music choices, and the user’s own media library.

Access is either through telecoms networks or through free Wi-Fi available at home or from millions of free wireless terminals. The multi-standard chip lets us forget about having to make a choice between network connections. We click and listen to our favourite radio station, that is all there is to do. ‘IP radio’ offers every radio station that is available via a conventional transistor radio.

The internet handset is connected to the car radio, the home hi-fi, the radio alarm clock, and chips that connect us to the internet on the move will be everywhere.

Already one and a half million iPhones have been sold in France. An entire industry, in less than two years, has caught up with touchscreen technology and IP handsets. It is true that the bandwidth, like the handsets, remain expensive, and telecoms networks must gear themselves towards new demands, but the trend is there: prices will fall. Besides, on the horizon is a converged pricing structure combining fixed broadband and mobile internet access in a package that offers unlimited usage. Therefore, how can we possibly build a viable market for digital radio receivers when the replacement cycle for radios is ten years, whilst that for (subsidised) mobile handsets is 18 months?

Unlike digital terrestrial radio, there is a business model for radio delivered by IP – it allows listeners to demand and receive advertisements specifically tailored to specific audience needs. This is internet audio. Listening is measured in real time and advertising space is traded in virtual marketplaces. IP-delivered radio has produced an unprecedented explosion of creative initiatives, supported by new economic models suited to micro-enterprises – look at the success of Radio Paradise.

What had once been little but a visionary thought is now beginning to make headway as a global standard – mobile internet is the new deal. It is the antithesis of the existing strata of broadcast networks specific to each medium (radio, television). In the future fragile economic landscape, where the concerns of preserving energy and the environment are becoming priorities, can we continue as if nothing has happened?

Careful thought by the powers that be should lead them to take account of these facts and to re-focus their administrative processes which risk becoming bogged down without public subsidy. Why not consider better use of digital networks that already exist? Digital terrestrial television which already allows radio, for example? And, whatever the case with radio, promote mobile internet access in the broader context of migration to a ‘digital’ France.

The planned migration to digital terrestrial radio was not a mistake, but a ‘future of delays’ overtaken by a technological revolution which has surprised entire industries. Recognising this does not take anything away from those who have defended their point of view. A change of course is never a mistake when it allows you to avoid hitting the reefs.

[unabridged]

Digital radio: a European update

This month’s decision by Germany not to invest further public funds in developing the DAB radio platform has inevitably caused reverberations around Europe during the last fortnight. In an article headlined “There will always be FM”, Geneva-based Follow The Media notes that Germany is “Europe’s richest ad market for radio”, ensuring that what happened there would inevitably influence other territories.

In Austria, it is understood that the private and public stakeholders in DAB held an emergency meeting on 17 July to discuss the fall-out from the German decision. Nothing has yet been announced publicly.

In Spain, the Association of Spanish Commercial Radio (AERC) held a General Assembly this week which, amongst other things, considered the progress of DAB in Spain. AERC general secretary Alfonso Ruiz de Assin concluded: “The DAB system is obsolete in Spain and we have conveyed to the authorities that it is a road to nowhere”. He added that “traditional and digital [radio] will co-exist for a long time”.

In France, the timetable for implementation of its T-DMB digital radio system still looks challenging. The average French household has six radios and it is estimated that the replacement cycle for these will be ten years. From 1 September 2010, radios with display screens will incorporate a digital tuner. From 1 September 2012, all media players, mobile phones and GPS hardware will include digital radio. From 2013, all new cars will be sold with digital radios. Although digital TV switchover in France is happening in autumn 2011, there has been no date set yet for digital radio switchover. Radio station owners have applied to the government for a €16.5m grant to contribute to the costs of simulcasting on T-DMB over the next eight years (estimated at €30k per annum per station per market). The headline of a recent French article asked “Is digital radio success guaranteed?” and commented that “given the financial constraints required by this new method of distribution, the answer is not so obvious”. It noted that “FM radio will not disappear in the near future and that radio via the internet is increasingly popular”.

Also in France, the National Union of Free Radios has expressed concern that the T-DMB standard (like DAB) will require small stations to broadcast over a large coverage area as part of a cluster of broadcasters from each multiplex. It notes that such an arrangement will prove too expensive for small stations which are seeking an opportunity to go digital at low cost. The Union is advocating the DRM+ standard be used in France alongside T-DMB, and conducted a test broadcast in Paris this week. As one article noted, “DRM+ has the advantage of being more flexible – it is an opportunity for radio to be broadcast independently outside the big [T-DMB] multiplexes”.

Meanwhile, back in Germany, the Financial Times ran a story today headlined “Digital radio fails in Germany”. Asked about the prospects there for DAB radio, Hans-Dieter Hillmoth, deputy head of the German private broadcasters association (VPRT) said bluntly: “Currently there is no viable business model”. The article noted that, after ten years of DAB in Germany, only 600,000 DAB radios have been sold. In neighbouring Switzerland, it is anticipated that 300,000 DAB radios will have been sold by year-end. DAB radio receiver manufacturers, including the UK’s Pure, had expected to sell 300 million units in Germany. Asked what importance it attached to the German DAB market, global audio manufacturer Pioneer commented “absolutely none”, and it added that the death of traditional analogue radio receivers is “absolutely not in sight”.

DAB v internet: the tortoise and the hare

On Wednesday 10 December, Lord Carter told the Parliamentary Culture, Media & Sport Committee:

“Radio can be received on mobile phones and through the television. Could you have digital radio without DAB? Yes, you probably could. If we do want DAB, we need to push it along a bit or technology will drive it out”.

Push it along a bit” probably means state intervention and/or state subsidy.

Technology will drive it out” probably means technologies such as IP-delivered radio via the internet, Wi-Fi, Wi-Max, 3G and 4G, as well as broadcast radio delivered via Freeview, Freesat, Sky and cable.

The same day, evidence was published that demonstrates how one of these platforms – internet-delivered radio – is already poised to eclipse DAB radio. “With broadband internet access rising from 51% of UK households in 2007 to 56% in 2008 and the high profile launch of the BBC iPlayer, listening to the radio online has never been easier or more popular”, said the new RAJAR internet radio listening report. Its definition of internet listening is:

  • listening live via the internet
  • listening again via the internet
  • personalised online radio
  • podcasts.

The most informative graph in the RAJAR report was the one that wasn’t there….. the one that compares the weekly adult (15+) reach of the DAB platform with the internet platform:


Unfortunately, usage data for the DAB platform is not available on a comparable basis prior to Q2 2007. Suffice to say that commercial radio launched its national Digital One DAB multiplex on 15 November 1999, which could be considered “Year Zero” for DAB (although it was some time before DAB receivers filtered into shops). What is startling is that the reach of internet radio is so close behind that of DAB. If you were to add up the market value of all the marketing spots promoting the DAB platform that have run on BBC TV and radio and commercial radio over the last decade, their total would run into £m. Add the cost of the sterling efforts of the Digital Radio Development Bureau, jointly funded by the BBC and commercial radio, since 2001 to convince us of the value of DAB radio.

Now compare this with the marketing cost to date spent persuading us to listen to radio via the internet (lots of mentions within BBC radio programmes, but fewer on commercial radio), and it pales by comparison. And yet, listening via the internet is way up there, just behind DAB, driven largely by consumer demand rather than by public intervention.

The other interesting statistic in the RAJAR report was the glaring difference between the online impact of the BBC and the commercial radio sector. Of those who listen to radio via the internet,

  • 71% listen via a BBC radio website
  • 25% listen via a UK commercial radio website
  • 13% listen via a non-BBC, non-UK commercial radio website

This merely confirms something that was evident already – in the 1990s, the biggest players in the UK commercial radio industry decided to put all their ‘future of radio’ eggs in the ‘DAB’ basket and, as a result, neglected to make a comparable investment in the online platform. The BBC has been much more careful (and, admittedly, has the immense resources available) to develop content across a number of platforms simultaneously, and is now reaping the return. Commercial radio could have developed its own ‘last.fm’ but chose instead to invest huge sums in the DAB platform infrastructure, rather than content, and is now paying the price.

Lord Carter will have to make a difficult (and potentially expensive) political recommendation between now and January 2009 about the future of the DAB platform:

OPTION 1 – Massive state financial intervention to prop up the expensive DAB transmission infrastructure. Who benefits? UK industry. The end result is a closed, almost UK-exclusive system (just like right-hand drive cars). UK radio set manufacturers sell lots of DAB radios in the UK because it is not worthwhile for the global consumer electronics groups to manufacture DAB radios for such a small addressable market. The large UK commercial radio groups and the BBC benefit because they already own both the entire DAB multiplex infrastructure and most of the content broadcast on it, ensuring that most radio listening in the UK remains under their control. Who loses? The consumer. They get a marginally increased choice of radio content that, so far, has failed to propel the DAB platform to mass take-up.

OPTION 2 – No state intervention to support the DAB platform. Who loses? UK industry. DAB remains economically unviable (just as it has been for a decade), forcing commercial radio groups to withdraw from the platform (with substantial balance sheet write-downs). DAB becomes the province of the BBC to offer minority interest services. UK radio set manufacturers lose most of their promised UK market for DAB radios. 7m DAB radio owners complain to Ofcom that all they can receive now on DAB are BBC stations. End result. The UK joins the rest of the world in accepting that IP-delivered radio is an emerging global platform from which the UK benefits from economies of scale (cheap receivers, evolution and innovation). The UK has to admit that DAB seemed like a promising technology in the pre-broadband late 1980s, but its slow implementation was overtaken by technological developments elsewhere and the globalisation of content.

As recently as 2004, The Guardian reported:

“The DTI hopes digital radio will become a rare British industry success story; Ofcom thinks it could get some juicy spectrum to sell off; manufacturers and retailers see rich pickings (“the flat-screen TV of tomorrow”, as the man from Dixons told me). Everyone, that is, except the British consumer, who is showing worrying signs of being dazzled by the new technology. According to Stephen Carter, Ofcom chief executive and digital radio owner, most Britons would be on my wife’s side – pretty sure that DAB is a good thing, but not quite sure what it is. Last Thursday, in a drum-beating speech to the Social Market Foundation, Carter described the radio industry’s foray into digital platforms as at a tipping point between a Sky-style digital success story and an industry-wide egg-on-face scenario.”

Four years later, are we any more certain about DAB? There may be a lesson to be learnt from Taiwan:

“The development of DAB in Taiwan passed through three stages: planning, preparation and a final stage characterized by setbacks. It now looks like it may disappear altogether…… After two years of trials, DAB experienced problems, partly because of a lack of promotion, inadequate public knowledge of the technology and high-priced DAB radios that few were willing to purchase. As a result there were too few consumers to keep DAB up and running. In July this year, Taiwan Mobile announced that Tai Yi would be dissolved, and the outlook for other DAB providers is not very bright. The biggest problem for Taiwan’s DAB industry was a lack of forward-looking policies……”